B2.502 Period in which receipts are recognised
General principles of revenue recognition
For UK GAAP purposes, receipts are broadly 'earned' when goods are sold or services are provided1. The receipts should be measured at the fair value of the consideration received or receivable, taking account of any trade discounts2.
Accordingly, when sales are made in an accounting period, the sale price should normally be brought into account for tax purposes in that period even if the proceeds are not received until after the end of the period (subject to a possible provision for bad debts).
The cases described in this article are concerned with specific instances giving rise to exceptions to the general principle outlined above.
Determination of the date of sale
The revenue arising from the sale of goods can only be recognised when all of the following conditions are satisfied3:
• the significant risks and rewards of owning the goods has been transferred to the buyer
• the business no longer has managerial involvement or effective control over the goods sold
• the revenue can be measured reliably
• it is probable that the economic benefits associated with the transaction will flow to the entity, and
• the costs which have been or will be incurred in respect of the transaction can be measured reliably
In the context of the provision of services, revenue is to be recognised when the outcome of the transaction can be estimated reliably, which occurs once the following conditions have been satisfied4:
• the quantum of revenue,
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